Ali v. Volkswagen Group of America, Inc.Ali v. Volkswagen Group of America, Inc.
Plaintiff Syed Ali has filed this products liability suit against Defendants Volkswagen Group of America, Inc., improperly named as Volkswagen Group of America, Inc. d/b/a Audi of America, Inc. (hereinafter “Volkswagen“), and Audi AG, a foreign organization, seeking damages for injuries he suffered when the Audi Q5 vehicle he was driving struck a piece of debris on the road and ignited into flames. The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to
BACKGROUND
The events giving rise to this lawsuit occurred in July 2017, when Plaintiff was driving an Audi Q5 (the “Subject Vehicle“) on a flat and smooth roadway in DuPage County, Illinois. After the vehicle struck a piece of debris on the road, the car ignited into flames “without warning,” resulting in “multiple injuries” tо Plaintiff. (Doc. 26, FAC, ¶¶ 7, 8). About two years later, on July 5, 2019, Plaintiff filed suit in Illinois state court charging Volkswagen with negligence, breach of implied warranties of merchantability and fitness, manufacturing and design defects, and failure to warn. (Doc. 1-1). Volkswagen removed the case to federal court on September 13, 2019 based on diversity jurisdiction, noting that Plaintiff is a citizen of Illinois, while Volkswagen is a New Jersey corporation with its principal place of business in Virginia. (Doc. 1 ¶¶ 5, 6).
During a hearing on November 5, 2019, the district judge granted Plaintiff‘s orаl motion for leave to amend the complaint in lieu of responding to a motion to dismiss filed by Volkswagen. (Doc. 23). Plaintiff filed his First Amended Complaint (“FAC“) on November 19, 2019, once again asserting claims for negligence (Counts I and VII), breach of the implied warranties of merchantability and fitness (Counts II and III), and strict product liability based on design and manufacturing defects and failure to warn (Counts IV, V and VI). Plaintiff also added a new claim for violation of the ICFA (Count VIII), and named German automobile manufacturing company, Audi AG, and thе car dealership where the car was purchased, McGrath Imports, Inc. (“McGrath“), as Defendants. On September 3, 2020, the district judge determined that McGrath was not properly joined in the case and dismissed the dealership without prejudice. Ali v. Volkswagen Group of Am., Inc., No. 19 C 6148, 2020 WL 5250669 (N.D. Ill. Sept. 3, 2020).
Volkswagen has answered Plaintiff‘s negligence claims but seeks dismissal of all other counts. This opinion addresses the motion to dismiss the warranty and fraud claims.
DISCUSSION
In evaluating the sufficiency of a complaint under Rule 12(b)(6), the Court “construe[s] all allegations and any reasonable inferences in the light most favorable to the plaintiff.” Jauquet v. Green Bay Area Catholic Educ., Inc., 996 F.3d 802, 807 (7th Cir. 2021). See also Zahn v. North Am. Power & Gas, LLC, 847 F.3d 875, 877 (7th Cir. 2017). “[W]hile a complaint does not need ‘detailed factual allegations,’ to survive a 12(b)(6) motion to dismiss, it must allege sufficient facts to ‘state a claim to relief that is plausible on its face.‘” Id.
A. The ICFA Claim (Count VIII)
The Court begins with Volkswagen‘s motion to dismiss Plaintiff‘s ICFA claim. The ICFA is “a regulatory and remedial statute intended to protect consumers, borrowers, and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices.” Siegel v. Shell Oil Co., 612 F.3d 932, 934 (7th Cir. 2010). To state a claim under the Act, Plaintiff must allege: “(1) a deceptive act or practice by the defendant, (2) the defendant‘s intent that the plaintiff rely оn the deception, (3) the occurrence of the deception in the course of conduct involving trade or commerce, and (4) actual damage to the plaintiff (5) proximately caused by the deception.” Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 149, 776 N.E.2d 151, 160 (2002). See also Maxwell as Trustee for Estate of Garcia v. Wells Fargo Bank, N.A., No. 20 C 2402, 2021 WL 1209023, at *7 (N.D. Ill. Mar. 31, 2021).
Volkswagen argues that dismissal of the ICFA claim is warranted because Plaintiff‘s allegations fail to satisfy the heightened pleading requirements of Rule 9(b), he is not a “consumer” under the Act, and he cannot prоve that he suffered actual damages.
1. Rule 9(b)
The parties do not dispute that the sufficiency of Plaintiff‘s fraud allegations under the ICFA must be “analyzed under the heightened pleading standard set forth in
The district judge has already determined that Plaintiff‘s allegations do “not come close to the who, what, when, and how standard under Rule 9(b)” for purposes of stating an ICFA claim against McGrath. Ali, 2020 WL 5250669, at *5.1 That is, Plaintiff “did not allege any
This Court finds the district judge‘s analysis well-reasoned, persuasive and equally applicable to Plaintiff‘s allegations against Volkswagen. The FAC cannot survive a motion to dismiss because Plaintiff has failed to plead with particularity the misrepresentations Volkswagen made to him upon which he relied. The question is whether Plaintiff should be granted leave to amend. “The district court should freely give leave to amend a complaint ‘when justice so requires.‘” Glover v. Carr, 949 F.3d 364, 367 (7th Cir. 2020) (quoting
Volkswagen argues that amendment would be futile because Plaintiff has not “set forth new or additional facts he might allege that would possibly cure the[] pleading deficiencies.” (Doc. 83, at 2). This is true, but it does not alone demonstrate that Plaintiff cannot allege additional facts to support his ICFA claim. Though it is difficult to imagine that Plaintiff will be able to identify specific misrepresentations Volkswagen allegedly made to him given that there is no evidence the company was involved in the sale of the Subject Vehicle, the Court cannot say with absolute certainty that Plaintiff will be unable to do so. For this reason, Volkswagen‘s motion to dismiss the ICFA claim pursuant to Rule 9(b) is granted without prejudice. Plaintiff may amend Count VIII to state a viable claim, if he can do so and comply with Rule 11.
2. Plaintiff‘s Status as а Consumer Who Suffered Actual Damage
Volkswagen argues that dismissal is also warranted because Plaintiff is not a consumer as defined by the Act and so did not suffer any actual damage. As a general rule, “plaintiffs invoking the Fraud Act must allege that they are ‘consumers’ under the Act.” Ali, 2020 WL 5250669, at *3. A consumer is defined as “any person who purchases or contracts for the purchase of merchandise not for resale in the ordinary course of his trade or business but for his use or that of a member of his household.”
Volkswagen argues that Plaintiff cannot satisfy the “consumer” requirement because he did not purchase the Subject Vehicle. This Court agrees, once again adopting the district judge‘s persuasive reasoning in finding that Plaintiff did not state a viable ICFA claim against McGrath. The FAC alleges that McGrath “sоld to Plaintiff the subject vehicle,” and that “Plaintiff is an individual who acquired the subject vehicle by purchasing it from Defendant McGrath.” (Doc. 26, FAC, ¶¶ 4, 64). In its joinder briefs, Plaintiff did not dispute that the Subject Vehicle was titled to, and so owned by Homebound Physicians, LLC, a corporation that is not mentioned in the FAC. Ali, 2020 WL 5250669, at *4. As the district judge observed:
[Plaintiff] does not plead any facts as to the actual purchase of the car. Nor does he fully explain his relationship to the company that owned the car, Homebound Physicians. In his response filings, Ali implies that he owns the business, but even that is not clear. R. 41 at 9 (“The Act includes the Plaintiff regardless of how his car is titled because it encompasses any conduct by him for his business“) (emphasis added); R. 56 at 11 (“[A]s is clear, McGrath sold the vehicle to the Plaintiff personally, and whether the representations was [sic] made to him personally or as an agent, the omissions and misrepresentations were made to him personally.“).
Id. (emphasis in original).
Plaintiff argued to the district judge, as he argues here, that the mere fact that Homebound Physicians owned the title to the Subject Vehicle was irrelevant because the ICFA covers both natural persons and businesses, and Plaintiff was an agent of the business. The district judge disagreed, noting that “just because the Fraud Act covers corporate entities, the correct legal entity still must bring the cause of action in any specific case. A natural person cannot simply stand in for a business in bringing a claim if the natural person is not otherwise a ‘consumer’ under the Act.” Id. As the judge explained, since Plaintiff “simply does not allege any facts to suggest that he personally purchased the vehicle,” he “is the wrong party to bring a claim.” Id. (emphasis in original).
Plaintiff has not added any new аllegations to the FAC since the district judge‘s decision, and the actual purchaser of the Subject Vehicle remains at best unclear. Indeed, Plaintiff claims in his brief both that he is “the person who bought the car” (Doc. 76, at 5), and that “Homebound Physicians, LLC was the actual purchaser.”2 (Id. at 6). On this record, Plaintiff has not stated a claim for relief under the ICFA as a “consumer” of the Subject Vehicle. The Court notes that if Plaintiff cannot establish that he purchased the Subject Vehicle personally (i.e.,
Plaintiff argues that even if he is not a consumer, he can still bring an ICFA claim by satisfying the “consumer nexus test.” (Doc. 76, at 5). The consumer nexus test “permits an ICFA claim where a plaintiff ‘alleges conduct [that] involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.‘” Mighty v. Safeguard Properties Mgmt., LLC, No. 16 C 10815, 2017 WL 3922130, at *3 (N.D. Ill. Sept. 7, 2017) (quoting Thrasher-Lyon v. Ill. Famers Ins. Co., 861 F. Supp. 2d 898, 912 (N.D. Ill. 2012)).4 “To satisfy the consumer nexus test at the pleading stage, a plaintiff must plead ‘(1) that its actions were akin to a consumer‘s actions to establish a link between it and consumers; (2) how defendant‘s reрresentations concerned consumers other than plaintiff; (3) how defendant‘s particular action involved consumer protection concerns; and (4) how the requested relief would serve the interests of consumers.‘” CHS Acquisition Corp. v. Watson Coatings, Inc., No. 17 C 4993, 2018 WL 3970137, at *12 (N.D. Ill. Aug. 20, 2018) (quoting Thrasher-Lyon, 861 F. Supp. 2d at 912). Plaintiff claims that he meets this test because “[his] use of the vehicle purchased by [Homebound Physicians] was akin to a typical consumer‘s actions for such a product; Defendants’ representations that the vehicle was safe for ordinary use concerns аll consumers, not just Homebound Physicians; Defendants’ breach involved consumer protection concerns based on the safety risks to all consumers, and the physical injury
suffered by Ali; and Plaintiff‘s requested relief would serve the interests of consumers by discouraging [sic] future safety warranties, and by providing the current injured Plaintiff with some form of relief.” (Doc. 76, at 6).
Volkswagen does not respond to this argument in its reply brief or deny the potential applicability of the consumer nexus test in this case. As stated previously, it is diffiсult to imagine that Plaintiff will be able to identify specific misrepresentations Volkswagen allegedly made to him given that there is no evidence the company was involved in the sale of the Subject Vehicle. If Plaintiff has a good faith basis for
B. The Implied Warranty Claims (Counts II and III)
Volkswagen next seeks dismissal of Plaintiff‘s implied warranty claims. Under the Uniform Commercial Code (“UCC“), codified in Illinois at
Volkswagen argues that Plaintiff‘s claims for breach of the implied warranties of merchantability and fitness for a particular purpose must be dismissed because he has not, and cannot, allege privity of contract with Volkswagen. Generally speaking, privity is “[t]he connection or relationship between two parties, each having a legally recognized interest in the same subject matter (such as a transaction, proceeding, or piece of property).” Reid v. Unilever U.S., Inc., 964 F. Supp. 2d 893, 910 n.7 (N.D. Ill. 2013) (quoting Black‘s Law Dictionary 1320 (9th ed. 2009)). Vertical privity is “[t]he legal relationship between parties in a product‘s chain of distribution.” Id. See also Cameron v. Battery Handling Sys., Inc., No. 20-cv-3172, 2021 WL 918060, at *2 (C.D. Ill. Mar. 10, 2021) (quoting Szajna v. General Motors Corp., 115 Ill. 2d 294, 307, 503 N.E.2d 760, 765 (1986)) (“Vertical privity refers to the relationship betwеen those who are in the distributive chain.“). For example, “[a] consumer seeking to sue a product manufacturer who was not involved in the sale of the product to the consumer is said to lack vertical privity with that manufacturer.” Id. (citing Reed v. City of Chicago, 263 F. Supp. 2d 1123, 1124 n.1 (N.D. Ill. 2003)). Horizontal privity “refers to those who are not in the distributive chain of a product but who, nonetheless, use the product and retain a relationship with the purchaser, such as a member of the purchaser‘s family.” Cameron, 2021 WL 918060, at *2 (quoting Szajna, 115 Ill. 2d at 307, 503 N.E.2d at 765). “[W]hen a user of a product, aside from the consumer, is injured, that user is said to lack horizontal privity with the product manufacturer.” Reid, 964 F. Supp. 2d at 910 n.7.
Neither party acknowledges that the concept of privity encompasses these two distinct elements, or frames their arguments in terms of vertical versus horizontal privity. The Court has done its best to parse the arguments into the proper categories.
1. Vertical Privity
In Illinois, “whether a complaint bringing claims for breach of the implied warranty of merchantability [and fitness for a particular purpose] must plead vertical privity to survive a motion to dismiss depends on the nature of the injury alleged.” Cameron, 2021 WL 918060, at *3. Where a plaintiff alleges only economic damages, “he or she must be in vertical privity of contract with the seller,” meaning
In arguing for dismissal based on lack of vertical privity, Volkswagen focuses on the fact that it is not the seller of the Subject Vehicle. (Doc. 72, at 3; Doc. 83, at 3). Indeed, the FAC alleges that McGrath “sold . . . the subject vehicle in May 2017 that ignited into a fireball shortly thereafter.” (Doc. 26, FAC, ¶ 4). As noted, however, this is only dispositive to a vertical privity analysis if Plaintiff is seeking purely economic damages. Here, Plаintiff alleges that he suffered “multiple injuries from the flames from the car.” (Doc. 26, FAC, ¶ 8). Volkswagen simply ignores this allegation, along with the case law indicating that since Plaintiff is seeking to recover damages for personal injuries, and not just economic damages, he is not required to allege that Volkswagen is the direct seller of the Subject Vehicle. Volkswagen‘s motion to dismiss Counts II and III for lack of vertical privity is denied.
2. Horizontal Privity
That does not end the Court‘s inquiry, however, because Plaintiff must still establish horizontal privity, i.e., that he purchased the Subject Vehicle. As noted earlier, the FAC alleges that McGrath “sold to Plaintiff the subject vehicle,” and that “Plaintiff is an individual who acquired the subject vehicle by purchasing it from Defendant McGrath.” (Doc. 26, FAC, ¶¶ 4, 64). The concept of horizontal privity is similar to the ICFA‘s requirement that Plaintiff be the “consumer” of the Subject Vehicle, and this Court once again agrees with the district judge‘s determination that the allegations in the FAC are not sufficient to demonstrate that Plaintiff purchased the car in his individual сapacity, and not as a representative of Homebound Physicians. Volkswagen‘s motion to dismiss Counts II and III for lack of horizontal privity is therefore granted.
Plaintiff argues that even accepting that he was not a direct purchaser of the Subject Vehicle, horizontal privity is not required because he is a third-party beneficiary of the car. (Doc. 76, at 3). In support he cites Whitaker v. Lian Feng Mach. Co., 156 Ill. App. 3d 316, 509 N.E.2d 591 (1st Dist. 1987), a case that considered the scope of warranty protection for third-party beneficiaries undеr UCC section 2-318.5 The court first noted that section 2-318 establishes a “conclusive presumption that the purchaser who bargained for a warranty of safety sought the warranty on behalf of himself and ‘any
natural person who is in [his] family or household . . . or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods . . . .‘” Id. at 321,
The problem for Plaintiff is that he still fails to articulate his рrecise relationship with Homebound Physicians. Though he suggests he may be an agent, employee or representative of the company, he does not clearly say so, or include any allegations to that effect in the FAC. This is significant because courts have found that ”Whitaker and its progeny concern solely the situation where the injured party is an employee of the buyer.” Lukwinski, 312 Ill. App. 3d at 393, 726 N.E.2d at 672. See also Reed, 263 F. Supp. 2d at 1125 (“The vast majority of cases examining the limits of section 2-318 in Illinois have dealt with the employment context, expanding the class of potential breach of warranty plaintiffs to employees of the ultimate purchaser.“). Though “courts may enlarge the scope of section 2-318 where the circumstances of a case warrant,” Lukwinski, 312 Ill. App. 3d at 393, 726 N.E.2d at 672, Plaintiff does not argue for such an extension here or otherwise explain how he is entitled to warranty protection for injuries he allegedly sustained while driving a car that was purchased by Homebound Physicians. See, e.g., Reed, 263 F. Supp. 2d at 1125-26 (expanding coverage for breаch of warranty claims under section 2-318 to mentally unstable detainee who used the allegedly defective product (a paper isolation gown purchased by the City of Chicago) to hang himself).
Volkswagen‘s motion to dismiss the implied warranty claims is granted. Plaintiff may amend the FAC only if he has a good faith basis for claiming that he qualifies as the “purchaser” of the Subject Vehicle, that he is an employee of Homebound Physicians which purchased the Subject Vehicle, or that the circumstancеs of this case otherwise support enlarging the scope of section 2-318 to cover him.
3. Fitness for a Particular Purpose
Though neither party raises this issue, the Court notes another problem with Plaintiff‘s claim for breach of an implied warranty of fitness for a particular purpose under section 2-315 (Count III). To state such a claim, Plaintiff must allege that “(1) the seller had reason to know of the particular purpose for which the buyer required the goods; (2) the buyer relied on the seller‘s skill and judgment to select suitable goods; and (3) the seller knew of the buyer‘s reliance on its skill and judgment.” CHS Acquisition Corp., 2018 WL 3970137, at *6. Significantly, “[n]o warranty for a particular purpose is created if the intended use is no different from the ordinary use of the product.” Id. (quoting Rosenstern v. Allergan, Inc., 987 F. Supp. 2d 795, 804 (N.D. Ill. 2013)). See also Wilson v. Massey-Ferguson, Inc., 21 Ill. App. 3d 867, 869-70, 315 N.E.2d 580, 582 (4th Dist. 1974). “A ‘particular purpose’ differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily
Here, Plaintiff alleges generally that “Defendants impliedly warranted that it [sic] would provide goods fit for the particular purpose intended for which consumers, including Plaintiff, intended to use the goods.” (Doc. 26, FAC ¶ 25). He also alleges that he was operating the Subject Vehicle “as intended” when the car ignited into flames. (Doc. 26, FAC ¶ 26). What is missing are any allegations suggesting that Plaintiff intended to use the Subject Vehicle in some manner different from the car‘s ordinary purpоse of driving, that Volkswagen knew of Plaintiff‘s plan to use the car for a non-ordinary purpose, or that Plaintiff relied on Volkswagen‘s skill and judgment to select a car suitable for that non-ordinary purpose.
If Plaintiff determines there are facts that reasonably support these allegations, he must clearly state them in any amended pleading. To the extent Plaintiff is simply alleging that the Subject Vehicle was not fit for the ordinary purpose of driving, meaning the car was not “in a safe condition and substantiаlly free of defects,” he is limited to pursuing his claim in Count II for breach of the implied warranty of merchantability. Oggi Trattoria and Caffe, Ltd. v. Isuzu Motors Am., Inc., 372 Ill. App. 3d 354, 361, 865 N.E.2d 334, 340-41 (1st Dist. 2007).
CONCLUSION
For the reasons set forth above, Defendant Volkswagen Group of America, Inc.‘s Motion to Dismiss Counts II, III, and VIII of Plaintiff‘s First Amended Complaint [72] is granted without prejudice.
Dated: September 13, 2021
ENTER:
SHEILA FINNEGAN
United States Magistrate Judge